The Role of Asset Markets for Private Consumption: Evidence from Paneleconometric Models

Christian Dreger and Hans-Eggert Reimers

No 872, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We explore the long and short run relationship between private consumption, disposable income and housing and financial wealth approximated by price indices for a panel of industrialized countries. Consumption, income and wealth are cointegrated in their common, but not in their idiosyncratic components. This stresses the relevance of inter-national spillovers to explain aggregate consumption behaviour. The cointegrating vector is robust and in line with the life cycle permanent income hypothesis. The in-come elasticity does not differ from unity, and wealth elasticities are within a range of 2 to 5 percent. According to the error correction mechanism, consumption could not be interpreted as a weakly exogenous series.

Keywords: Permanent income hypothesis; panel cointegration; wealth effects (search for similar items in EconPapers)
JEL-codes: C23 E21 E32 G15 (search for similar items in EconPapers)
Pages: 28 p.
Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.96430.de/dp872.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp872

Access Statistics for this paper

More papers in Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().